Daily Options Report

So our two silliest market indicators are in opposition for 2010. SPX declined in January, meaning of course that we're doomed. DOOMED. But the Super Bowl Indicator is guaranteed to flash Green Skies ahead. This, from Mark Hulbert.

The Super Bowl Indicator, as many market followers know, holds that stocks will rise over the coming year if the winning team can trace its roots back to the original National Football League -- and fall if that team's roots are in the old American Football League. Followers claim that the Indicator has a 79% success rate, far better than most other popular stock market timing systems.

The reason that this Indicator will flash a buy signal on Sunday, regardless of which team wins, is that both of them trace their roots back to the original NFL.

It is of course Exhibit A if you want to give a lesson on the difference between coincidence and causality. Especially in the context of small sample size. Well, unless there is causality that I'm missing.

Does such an explanation exist for the Super Bowl Indicator? The only one I've ever seen, after years of searching, comes from finance professor George Kester of Washington & Lee University, whose study of the Indicator will appear in the Spring 2010 issue of the Journal of Investing.

He is quoted on his university's Web site as saying that the Indicator can probably be traced to "the first time that a team from the old AFL won, which was Super Bowl III in 1969, when the upstart New York Jets and quarterback 'Broadway' Joe Namath stunned the heavily favored Baltimore Colts. Investors thought the Jets' upset victory meant there must be something amiss in America and it was time to sell, and that's been built into the American psyche ever since."

Lest you take this explanation seriously, Kester hastens to add that he offered it with tongue firmly in cheek.

Or maybe just a New York team making the Super Bowl is bearish. The Jets have yet to return, but the Giants made appearances in 1987, 1991, 2001 and 2008, all lousy market years.